Interest rates on home loans moved moderately lower this past week and could continue that trend into the next report.
Thirty-year fixed rates averaged 4.12 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Aug. 14.
In next week’s report, 30-year mortgages are likely to average around 4.08 percent based on this week’s Treasury market activity.
Treasury Department data indicate the 10-year Treasury yield — a benchmark for fixed mortgage rates — averaged 2.44 percent during the days Freddie surveyed lenders this week, while the 10-year yield closed at 2.40 percent Thursday.
However, no changes were expected by an overwhelming majority of panelists surveyed by Bankrate.com for the week Aug. 14 to Aug. 20. A fifth forecasted that rates will move up at least 3 basis points, and just 7 percent predicted a decline.
In its August 2014 Economic and Housing Market Outlook, Freddie predicted that 30-year rates will average 4.2 percent in the third quarter and 4.3 percent in the fourth quarter. Next year’s average is projected at 4.7 percent.
The U.S. Mortgage Market Index report from LoanSifter/Optimal Blue and Mortgage Daily for the week ended Aug. 8 had jumbo mortgages priced 9 BPS less than conforming rates. The jumbo-conforming spread narrowed from a negative 11 BPS in the prior report.
In Freddie’s survey, 15-year fixed rates averaged 3.24 percent, down 3 BPS from the week ended Aug. 7. The spread between 15- and 30-year mortgages was 88 BPS, better than 87 BPS in the previous report.
Freddie reported the average five-year, Treasury-indexed, hybrid, adjustable-rate mortgage at 2.97 percent, down a single basis point from seven days earlier.
Freddie forecasts that hybrid ARMs will average 3.2 percent this quarter and 3.4 percent in the final three months of this year.
One-year Treasury-indexed ARMs averaged 2.36 percent in Freddie’s report, 1 basis point higher than seven days earlier. One-year ARMs averaged 2.67 percent in the week ended Aug. 15, 2013.
One-year ARMs will average 2.4 percent in the third quarter and 2.5 percent the following quarter, according to Freddie’s outlook.
One-year ARMs adjust based on the yield on the one-year Treasury note, which slipped to 0.10 percent Thursday from 0.11 percent seven days earlier, according to the Treasury Department.
An index used on may subprime ARMs is the six-month London Interbank Offered Rate, which was 0.33 percent as of Wednesday, unchanged from seven days earlier, according to Bankrate.com.
ARMs accounted for 11.4 percent of all pricing inquiries in the latest Mortgage Market Index report. ARM share rose from 10.9 percent a week earlier.
Freddie has ARM share at 12 percent this quarter and 13 percent in the final quarter of 2014.